Question 1

The first income tax on individuals after the ratification of the Sixteenth Amendment to the Constitution) levied tax rates from a low of 2% to a high of 6%.

Accepted Answer

The first income tax on individuals after the ratification of the Sixteenth Amendment to the Constitution did indeed levy tax rates from a low of 2% to a high of 6%.

Question 2

The Federal estate and gift taxes are examples of progressive taxes.

Accepted Answer

The Federal estate and gift taxes are examples of progressive taxes because they are based on the value of the assets being transferred and the relationship between the giver and the recipient, with higher rates applying to larger transfers and non-family members.

Question 3

The FICA tax Medicare component) on wages is progressive since the tax due increases as wages increase.

Accepted Answer

The Medicare component of the FICA tax is a flat rate tax, not progressive; it applies the same percentage rate to wages regardless of income level.

Question 4

Currently, the Federal corporate income tax is less progressive than the individual income tax.

Accepted Answer

The Federal corporate income tax has a flat rate of 21% for all corporations, regardless of their income level. On the other hand, the individual income tax has a progressive tax rate system where the tax rate increases as income level increases.

Question 5

The pay-as-you-go feature of the Federal income tax on individuals conforms to Adam Smith's canon principle) of certainty.

Accepted Answer

The pay-as-you-go feature of the Federal income tax on individuals does not conform to Adam Smith's canon (principle) of certainty as it requires individuals to estimate and prepay their taxes ahead of time, which can be uncertain and subject to change. Smith believed in a clear and certain tax system where individuals knew exactly what they owed and when they owed it.

Question 6

The ad valorem tax on personal use personalty is more often avoided by taxpayers than the ad valorem tax on business use personalty.

Accepted Answer

This is because there are more opportunities for taxpayers to exploit exemptions, deductions, and loopholes when it comes to personal use personalty. Additionally, personal use property is often harder to track and value accurately compared to business use property.

Question 7

Before the Sixteenth Amendment to the Constitution was ratified, there was no valid Federal income tax on individuals.

Accepted Answer

Before the Sixteenth Amendment, the Federal government did levy income taxes, notably during the Civil War period. However, the legality of a permanent income tax was challenged and led to the Supreme Court ruling in Pollock v. Farmers' Loan & Trust Co. (1895) that such taxes were unconstitutional if not apportioned according to state populations. The Sixteenth Amendment, ratified in 1913, explicitly allowed the Federal government to levy an income tax without apportionment among the states.

Question 8

The ratification of the Sixteenth Amendment to the U.S. Constitution was necessary to validate the Federal income tax on corporations.

Accepted Answer

The Sixteenth Amendment to the U.S. Constitution allowed for the Federal income tax on individuals, not just corporations. The tax on corporations had been previously upheld by the Supreme Court in the case of Pollock v. Farmers' Loan & Trust Co. (1895), but was struck down as unconstitutional because it was not apportioned among the states. The Sixteenth Amendment was adopted in 1913 to establish the legality of a Federal income tax on individuals and corporations without the need for apportionment.

Question 9

Because the law is complicated, most individual taxpayers are not able to complete their Federal income tax returns without outside assistance.

Accepted Answer

The federal income tax system is complex and requires understanding of various rules and regulations. This complexity makes it challenging for individuals to complete their tax returns accurately without assistance.

Question 10

Even if property tax rates are not changed, the amount of ad valorem taxes imposed on realty may not remain the same.

Accepted Answer

This is because the assessed value of the property may change, which directly affects the amount of ad valorem taxes that are imposed. Additionally, changes in tax exemptions or other factors can also impact the amount of ad valorem taxes imposed.

Question 11

Like the Federal counterpart, the amount of the state excise taxes on gasoline varies from state to state.

Accepted Answer

The answer of Like the Federal counterpart, the amount of...

Question 12

Mona inherits her mother's personal residence, which she converts to a furnished rental house. These changes should affect the amount of ad valorem property taxes levied on the properties.

Accepted Answer

When a property is converted to a rental property, it may be subject to different tax rates and assessments than when it was owner-occupied. The value of the property may also change based on the rental income it generates. Therefore, the amount of ad valorem property taxes could be affected by such changes.

Question 13

There is a Federal excise tax on hotel occupancy.

Accepted Answer

The Federal government does not impose an excise tax on hotel occupancy; such taxes are typically levied at the state or local level.

Question 14

An excise tax is often used to try to influence behavior.

Accepted Answer

Excise taxes are often used to discourage certain behaviors or promote certain desired behaviors, such as taxing cigarettes to discourage smoking or providing tax incentives for energy-efficient home improvements to encourage environmental sustainability.

Question 15

The Federal gas-guzzler tax applies only to automobiles manufactured overseas and imported into the U.S.

Accepted Answer

The Federal gas-guzzler tax applies to all automobiles sold in the U.S. with low fuel efficiency, regardless of where they were manufactured.

Question 16

Not all of the states that impose a general sales tax also have a use tax.

Accepted Answer

All states that have a general sales tax also impose a use tax to ensure that purchases made out of state for use within the state are taxed equivalently to in-state purchases.

Question 17

Sales made by mail order are not exempt from the application of a general sales or use) tax.

Accepted Answer

Sales made by mail order are subject to the same sales or use tax as sales made in physical retail locations.

Question 18

The Federal income tax on individuals generates more revenue than the Federal income tax on corporations.

Accepted Answer

According to the IRS, in 2019, individual income taxes accounted for approximately 50% of total Federal revenue, while corporate income taxes accounted for approximately 6%. Therefore, the Federal income tax on individuals generates more revenue than the Federal income tax on corporations.

Question 19

A fixture will be subject to the ad valorem tax on personalty rather than the ad valorem tax on realty.

Accepted Answer

A fixture, once attached to real property, is generally considered part of the real property and thus would be subject to the ad valorem tax on realty, not personalty.

Question 20

The Federal excise tax on cigarettes is an example of a proportional tax.

Accepted Answer

A proportional tax is one where the tax rate remains the same regardless of the taxpayer's income or ability to pay. The Federal excise tax on cigarettes is a fixed amount per pack or carton, making it a proportional tax.

Quiz 1: An Introduction to Taxation and Understanding the Federal Tax Law